Remember the time when the TV set was unchallenged and that was that?
As Netflix pursues its assault on the UK market, Raymond Snoddy analyses the four-way OTT battle, as well as the latest Thinkbox and Deloitte research studies…
Almost out of nowhere we suddenly have a four-way battle with OTT – over the top, online, on-demand entertainment TV in the UK.
The implications for the never-ending competition for eyeballs is at best uncertain.
First there was LOVEFiLM – although that was initially mainly a Post Office delivery DVD system rather than a streamed service. An acquisition by Amazon ensured LOVEFiLM’s place in the on-demand firmament.
blinkbox, the online movie and television service, also received a large boost when its financial future was underpinned by the Tesco purchase.
But until the beginning of this year the long rumoured invasion from the US simply hadn’t amounted to a row of beans.
Then Netflix came along in January with its threat of cutting the “cable cord” and indeed the satellite subscription.
The most concrete evidence that this new invasion was being taken seriously came last month (July) when BSkyB committed £30 million to the first year of Now TV. It is a new product seeking a new revenue stream from those not interested in a full satellite package.
But it must also be seen as trying to keep at least some of the money within the company, should any British subscribers decide to “cut the cord”.
The first rather dramatic sign that the online battle could become a real one over time came this week with the announcement from Netflix that since January it has come from nowhere to one million subscribers in the UK and Ireland.
Wow. A nice round number – one million. And you can get the Netflix service of on-demand films and TV shows for a mere £5.99 a month.
Netflix chief executive Reed Hastings was entitled to say: “This membership milestone is evidence that Netflix has rapidly gained popularity in the UK and Ireland.”
The US company talks about registered users. Do registered users include all of those who have signed up for free introductory offers distributed by post to the UK population?
If so will they all stick when they have to pay? And will the rate of increase take off or fall back to earth once the initial, and presumably expensive, burst of publicity and direct marketing is over?
The reason Netflix has been so keen to move into the UK, with Scandinavia to follow, is obvious. It is heading for maturity in its home US market. In the second quarter Netflix added 400,000 new subscribers compared to 1.8 million in the same period last year.
Netflix already has 30 million members in the US, Canada and Latin America but research in the US suggests that Netflix services are not ideal for all viewers.
Sports-lovers and heavy TV users have little to gain by going to the OTT operators. American users of services like Netflix still have to get their internet services from someone and they lose multi-package discounts when they decamp. And then they have to buy their separate sports packages.
But even after all the caveats have been registered the symbolic one million “milestone” is still impressive.
The announcement came hot on the heels of new research from Thinkbox showing that 90% of television is still being watched live. The research covered viewing figures for the first half of this year, which means it is likely to provide useful information (the inclusion of one-off Olympics coverage would have taken the figures off the dial and told us very little).
The Thinkbox work reinforces what we think we know about TV viewing in the UK. It has stabilised at around four hours a day and commercial TV accounts for 67% of total linear viewing – even higher for 16 to 34 years olds.
Some of the detail is interesting given the intensifying on-demand battle. No less than 63% of UK viewing is made up of drama, including soaps, entertainment and films – the very area that the OTT operators are mainly targeting.
Interesting that news, for example, only accounts for 5% of total viewing, although that reflects the fact that there are a relatively small number of news programmes, apart from the minority pursuit of non-stop news channels.
Thinkbox does concede that some live streamed viewing, but mainly on-demand, on other screens such as laptops, tablets and smartphones, is growing in the UK.
The slight problem is that this growing form of viewing is not included in the official BARB figures and therefore its impact – however small – is not included in the BARB-based Thinkbox research.
In a rather extraordinary note it seems that BARB has been monitoring this viewing since 2005. The figures suggest that there is 1.2% of extra viewing via other devices – a percentage that rises to 2.9% for 16 to 34 year olds.
There was clearly a time when the television set was the unchallenged television set and that was it. It still is to a great extent. But with the arrival of YouView and similar internet services delivered to the television screen, never mind the OTT operators, there will have to be a debate about what audience research covers and what should be included.
As part of a package of research for this year’s MediaGuardian Edinburgh International Television Festival (MGEITF) this week Deloitte has picked up the latest information on yet another growing trend – the second screen.
Watching television on its own is no longer enough for the young. Nearly a quarter of viewers are now using other screens such as laptops and smartphones while watching TV. This percentage rises to nearly half of all 16 to 24 year olds.
According to Deloitte the main role of the second screen is driving conversations about a programme rather than interacting with it.
It would also make little commercial sense, they conclude, to make original content for the second screen because each pound spent there would divert a pound from the programme being discussed on the big screen.
At least that’s one less thing for the television industry to worry about as it heads for Edinburgh and Netflix pursues its assault on the UK market.
Read more on the MGEITF from Raymond Snoddy and Newsline’s Liz Jaques next week.